Subject: Intellectual Property Rights & NII

Below is the Executive Summary of the National Information Infrastructure
Task Force draft report on intellectual property rights. The complete
report will be available on the IITF Bulletin Board, accessible through the
Internet by pointing the Gopher Client to iitf.doc.gov or by telnet to
iitf.doc.gov (log in as gopher). For a paper copy, call (703) 305-9300 or
write NII, USPTO, Box 4, Washington, D.C. 20231- 0001.

INTELLECTUAL PROPERTY AND THE NATIONAL INFORMATION INFRASTRUCTURE

A PRELIMINARY DRAFT OF THE REPORT OF THE WORKING GROUP ON INTELLECTUAL
PROPERTY RIGHTS

Executive Summary

INTRODUCTION

The Working Group on Intellectual Property Rights, chaired by Assistant
Secretary of Commerce and Commissioner of Patents and Trademarks Bruce A.
Lehman, was established as part of the White House Information
Infrastructure Task Force. The Task Force, chaired by Secretary of Commerce
Ronald H. Brown, was created to articulate and implement the
Administration's vision for the National Information Infrastructure (NII).
The Task Force is working with the private sector, public interest groups,
Congress and State and local governments to develop comprehensive
telecommunications  and information policies and programs that best meet
the country's needs. 

The Preliminary Draft of the Report of the Working Group on Intellectual
Property Rights represents the Working Group's examination and analysis to
date of the intellectual property implications of the NII. While it
addresses each of the major areas of intellectual property law, it focuses
primarily on copyright law and its application and effectiveness in the
context of the NII. The Working Group is issuing the Preliminary Draft to
solicit public comment prior to issuing a Final Report. The Working Group
will also hold public hearings on the Draft. 

BACKGROUND

The NII has great potential to increase access to information and
entertainment resources that will be delivered quickly and economically
anywhere in the country in the blink of an eye. For instance, hundreds of
channels of "television" programming, thousands of musical recordings, and
literally millions of "magazines" and "books" can be made available to
homes and businesses across the United States and, eventually, the world.
It can improve the nation's education and health care systems. It can
enhance the ability of U.S. firms to compete and succeed in the global
economy, generating more jobs for Americans. New job opportunities can also
be created in the processing, organizing, packaging and dissemination of
the information and entertainment products flowing through the NII. 

The NII is much more than computers, telephones, fax machines, scanners,
cameras, keyboards, televisions, monitors, printers, switches, routers,
wires, cables, networks and satellites. What will drive the success of the
NII is the _content_ moving through it. Therefore, the potential of the NII
will not be realized if the content is not protected effectively. Owners of
intellectual property rights will not be willing to put their interests at
risk if appropriate systems -- both in the U.S. and internationally -- are
not in place to permit them to set and enforce the terms and conditions
under which their works are made available in the NII environment.
Likewise, the public will not use the services available on the NII and
generate the market necessary for its success unless access to a wide
variety of works is provided under equitable and reasonable terms and
conditions, and the integrity of those works is assured. 

FINDINGS AND RECOMMENDATIONS

A. LAW

The Draft Report analyzes current copyright law and its application in the
NII environment. The Working Group concludes that, with the following
limited amendments and clarifications, the Copyright Act will provide the
necessary protection of rights in copyrighted works -- and appropriate
limitations on those rights. 

1. DISTRIBUTION BY TRANSMISSION

a. THE DISTRIBUTION RIGHT

The Copyright Act gives a copyright owner the exclusive right "to
distribute _copies or phonorecords_ of the copyrighted work" to the public.
A copy or phonorecord is a material object in which a copyrighted work is
fixed, such as a compact disc, a videocassette or a paperback book. It is
not clear that a transmission can constitute a distribution of copies of
the work under the current law. 

Yet, in the world of high-speed, communications systems, it is possible to
transmit a copy of a work from one location to another. This may be the
case, for instance, when a computer program is transmitted from one
computer to ten other computers. When the transmission is complete, the
original copy remains in the transmitting computer and a copy resides in
the memory of, or in a storage device associated with, each of the other
computers. Therefore, this transmission results essentially in the
distribution of ten copies of the work. 

The Working Group recommends that Section 106 of the Copyright Act be
amended to reflect the fact that copies of works can be distributed to the
public by transmission, and that such transmissions fall within the
exclusive distribution right of the copyright owner. The Working Group also
recommends that the definition of "transmit" in Section 101 of the
Copyright Act be amended to delineate between those transmissions that are
communications of performances or displays and those that are distributions
of reproductions. When a transmission may constitute both a communication
of a performance or display and a distribution of a reproduction (such as
when a phonorecord of a sound recording is distributed and the recipient
may listen to it while it is being downloaded), the Working Group
recommends that such a transmission be considered a distribution of a
reproduction if the _primary purpose or effect_ of the transmission is to
distribute a _copy or phonorecord_ of the work to the recipient of the
transmission. 

The Working Group also recommends that the prohibitions on importation be
amended to reflect the fact that copies or phonorecords of copyrighted
works can be imported into the United States by transmission. Although the
Working Group recognizes that the U.S. Customs Service cannot, for all
practical purposes, enforce a prohibition on importation by transmission,
given the global dimensions of the information infrastructure of the
future, it is important that copyright owners have the other remedies for
infringements of this type available to them.

b. PUBLICATION

The legislative history to the Copyright Act makes clear that any form of
dissemination of a work in which a _material object_ does not change hands
is not a "publication" of the work, no matter how many people are exposed
to it. Thus, a transmission of a performance or display via the NII would
not constitute publication, since a material object does not change hands.
However, in the case of a transmission of a reproduction, the recipient of
the transmission ends up with a copy of the work. Therefore, the Working
Group recommends that the definition of "publication" in Section 101 of the
Copyright Act be amended to include the concept of distribution by
transmission. 

C. FIRST SALE DOCTRINE

The first sale doctrine allows the owner of a particular, lawfully-made
copy of a work to dispose of it in any manner, with certain exceptions,
without infringing the copyright owner's exclusive right of distribution.
In the case of transmissions, a copy of the work remains with the first
owner (and the recipient of the transmission receives a reproduction of the
work); the owner does not dispose of his or her copy. Therefore, the
Working Group recommends that Section 109 of the Copyright Act be amended
to make clear that the first sale doctrine does not apply to transmissions.


2. TECHNOLOGICAL PROTECTION

The ease of infringement and the difficulty of detection and enforcement
will cause copyright owners to look to technology, as well as the law, for
protection of their works. Technology can be used to help protect
copyrighted works against unauthorized access, reproduction, manipulation,
distribution, performance or display. It can also be useful in the
authentication of the integrity of copyrighted works and in the management
and licensing of the rights in such works. However, it is clear that
technology can also be used to defeat any protection that technology
provides. 

Therefore, the Working Group recommends that the Copyright Act be amended
to prohibit the importation, manufacture and distribution of devices (or
any component or circuitry incorporated into any device or product), or the
offering or performance of any service, the primary purpose or effect of
which is to avoid, bypass, remove, deactivate, or otherwise circumvent,
without authority of the copyright owner or the law, any process,
treatment, mechanism or system which prevents or inhibits the exercise of
any of the exclusive rights under Section 106. The Working Group also
recommends other related amendments to provide civil causes of action and
remedies for violations of the proposed prohibition. 

3. COPYRIGHT MANAGEMENT INFORMATION

In the future, the copyright management information associated with a work
-- such as the name of the copyright owner, and the terms and conditions
for uses of the work -- may be critical to the efficient operation and
success of the NII. The public should be protected from fraud in the
creation or alteration of such information. Therefore, the Working Group
recommends that Section 506 of the Copyright Act be amended to prohibit
fraudulent copyright management information and fraudulent removal or
alteration of copyright management information. 

4. PUBLIC PERFORMANCE RIGHT

Sound recordings are the only copyrighted works that are capable of being
performed that are not granted a public performance right. The Working
Group believes that it is time to rectify this inequity. The Working Group
notes that the Administration supports two bills introduced in Congress
that would grant a limited performance right to sound recordings. The
bills, H.R. 2576 and S. 1421, would add to the exclusive rights of a
copyright owner in a sound recording the right to perform or authorize the
performance of the sound recording by "digital transmission." The right
granted in the bill is not the full performance right granted to other
copyrighted works. For instance, the legislation would not change the law
with respect to live public performances. It would also not touch analog
transmissions -- the transmissions currently received over the radio. It
would only grant a right with respect to transmissions in a digital format
-- those that pose the greatest threat to the copyright owners of sound
recordings. 

5. FAIR USE

The Working Group has significant concerns regarding the ability of the
limitations on copyright owners' exclusive rights -- particularly those
limitations found in Sections 107 (fair use), 108 (library exemptions) and
110 (1) and (2) (educational uses) -- to provide the public with adequate
access to copyrighted works transmitted via the NII. As more and more works
are available primarily or exclusively on-line, it is critical that
researchers, students and other members of the public have opportunities
_on-line_ equivalent to their current opportunities _off-line_ to browse
through copyrighted works in their school and public library. Public
libraries and schools historically have been safeguards against the United
States becoming a nation of information "haves" and "have nots." We must
ensure that they continue to be able to assume that role. 

Guidelines for library and educational use of printed matter and music were
voluntarily adopted by diverse parties and set out in the House and
Conference reports accompanying the 1976 revisions to the Copyright Act.
While the principles should still be applicable, it is difficult and,
perhaps, inappropriate, to apply the specific language of some of those
guidelines in the context of digital works and on-line services. Therefore,
the Working Group will sponsor a conference this summer to bring together
copyright owner and user interests to develop guidelines for fair uses of
copyrighted works by and in public libraries and schools. While
participation in the conference will be by invitation, the public may
attend. 

6. LICENSING

With limited exceptions, intellectual property law leaves the licensing of
rights to the marketplace. In certain circumstances, particularly where
transaction costs are believed to dwarf per-transaction royalties, Congress
has found it necessary to provide for compulsory licenses. The Working
Group finds that under current conditions, additional compulsory licensing
of intellectual property rights is neither necessary nor desirable. The
marketplace should be allowed to develop whatever licensing systems may be
appropriate for the NII. 

7. INTERNATIONAL

There must be adequate and effective protection for entertainment and
information products delivered via the global information infrastructure
(GII). This protection should be granted on the basis of national treatment
-- without regard to the origin of the transmission or the nationality of
the author. An appropriate intellectual property rights regime to protect
the content transmitted over the GII is an essential condition precedent if
the full benefits of the GII are to be enjoyed. 

To attain the needed level of protection internationally, we must also find
ways to span the differences between the continental _droit d'auteur_ and
neighboring rights systems and the Anglo-American copyright systems. An
essential element of this effort will be to harmonize levels of protection.


B. TECHNOLOGY

Interoperability and interconnectivity of networks, systems, services and
products operating within the NII will enhance its development and success.
Standardization of copyright management (standardized header information
and format, for instance) as well as technological protection methods (such
as encryption) may also be useful. However, intellectual property rights
should not be diminished in the standard-setting process, unless agreed to
by the owners of such rights. 

C. EDUCATION

Effective education of the public about intellectual property rights is
crucial to the successful development of the NII. Therefore, the principles
of intellectual property law must be taught in our schools and libraries.
Educational efforts to increase the public's awareness of their own
intellectual property rights, as well as those of others, will increase
respect for those rights. Clearer guidelines with respect to the exclusive
rights of copyright and other intellectual property rights holders, as well
as the limitations on those rights, will make compliance with the law
easier. 

Following its conference on fair use, the Working Group will sponsor a
second conference on intellectual property education. The purpose of that
conference will be to develop curricula that may be used in schools and
libraries. Additional means of education, particularly those that use the
NII itself, will also be explored and developed. Participation in the
conference will be by invitation, but all proceedings will be open to the
public. 

***

The Working Group is soliciting public comment on the Preliminary Draft.
The public may submit written comments to the Commissioner of Patents and
Trademarks on or before September 7, 1994. Reply comments may be submitted
until September 28, 1994. Comments may also be submitted electronically to
an Internet address. 

The Working Group expects to hold public hearings on the Preliminary Draft
in Washington, D.C., Chicago and Los Angeles. The details of these hearings
will be announced at a later date. The Working Group will also hold
conferences in Washington, D.C., on library and educational uses of
copyrighted works and on intellectual property education. Participation in
the conferences will be by invitation only, but the proceedings will be
open to the public.